U.S. will avoid euro zone contagion: top investors

NEW YORK (Reuters) - The United States faces only limited fallout from the euro zone debt crisis and the struggling European economy, a situation that bodes well for U.S. equity markets in 2012, top U.S. money managers said on Monday.

Hedge fund managers and institutional investors at the Reuters 2012 Investment Outlook Summit in New York said the chances for a recession in the world’s largest economy look very low and Europe’s struggles will be no more than a headwind.

“We’ve been able to segregate U.S. economic activity from European economic activity. I don’t know how we’ve done it, but we’ve done it,” said Tom Sowanick, chief investment officer at OmniVest LLC in Princeton, New Jersey.

Signs of recession are proliferating in parts of Europe, where leaders from France and Germany outlined a plan on Monday to impose more budget discipline.

But in the United States, leading indicators are strong and on the rise, said Kenneth Fisher, a billionaire investor and author whose money management firm oversees $40 billion in assets.

“You can’t find a recession recently when the leading economic indicators have been high and rising. And they are now,” said Fisher. “The odds of a recession any time soon, like in 2012, are close to zero.”

The leading economic indicator of the Conference Board, an industry group, rose 0.9 percent in October, extending a 0.1 percent increase in September and a 0.3 percent jump in August. The index is composed of 10 components designed to flag patterns and inflection points in the U.S. economy.

EUROPE A HEADWIND

David Joy, chief market strategist with Ameriprise Financial, said that while Europe will likely post anemic growth of just 0.5 percent to 1 percent over the next year, that will be ”another headwind, but not enough to make a difference.

“The bigger fear for us is if there’s a banking crisis, a liquidity crisis in Europe,” he said

The likely path of the U.S. economy, meanwhile, with the central tendency for growth over the next few years at about 2.5 percent, is - “not enough to make a big dent in the unemployment rate, but certainly not a double-dip recession.”

Fisher gave a very bullish outlook, saying that 2012 “will be a very nice year” for the United States. “The negative arguments are long in the tooth, the positives are not well appreciated, the economy globally is much stronger than people think,” Fisher said.

“Revenue growth, as a function of the economy, is pretty damn gangbusters,” he said. “I‘m more optimistic than most people you’ll find.”

Joy said the United States had made it through the “trauma” of the bitter Congressional debt ceiling/default debate in August relatively unscathed.

“It was a great unknown at the time, and we survived it ... what actually happened was people realized the world didn’t stop turning, so they started spending again.”

At this point, “conditions are better than people think,” Joy said. “I think the U.S. market is well positioned.”

Sowanick said strong U.S. corporate earnings are not being priced into the stock market. “Almost everyone is trying to fade the equity rally,” he said.

Auto sales and jobless claims have improved from a year ago, and the housing market, while still weak, does not represent the same level of economic drag as it did before the housing bubble burst, Sowanick said.

Sowanick pointed to the Bush-era tax cuts, which were extended in late 2010, and the Federal Reserve’s quantitative easing measures. “These are tailwinds rather than headwinds, and put us onto a firmer economic footing for next year,” he said.

Looking at where the Standard & Poor’s 500, which on Monday closed at 1,257.08 points, is likely to close out 2011, Sowanick, said, “I don’t think we’re hallucinating when we say there’s still a good chance to end at 1,365.”